Blockchain technology or the blockchain is a relatively new technology. Blockchain is further explained in a 2008 article by Satoshi Nakamoto, titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” the entire contents of which are hereby incorporated by reference. The blockchain is a data structure that stores a list of transactions and can be thought of as a distributed electronic ledger that records transactions between source identifiers and destination identifiers. Each transaction of the blockchain is bundled into blocks and every block (except for the first block) refers back to or is linked to a prior block in the chain. Computer nodes maintain the blockchain and cryptographically validate each new block and thus the transactions contained in the corresponding block. This validation process includes solving a computationally difficult problem that is also easy to verify and is sometimes called a “proof-of-work.”
While the transactions may be validated, the content or whether those transactions are valid is a major concern. The most celebrated aspect of Blockchain is that information is stored in an immutable ledger, distributed and trusted without the need for a central authority or intermediary party. While the focus on blockchain's value has traditionally been on its incorruptible, not enough attention is paid to the negative effects created when inputs to the trusted blockchain from any single source are untrustworthy. An example can be found in Bitcoin, where if a private key is stolen and a nefarious transaction is sent to the blockchain, the protocol will irreversibly report the transaction as valid, when in reality it was not. This is not an issue with the blockchain itself, rather, this is an issue with its data inputs. Said another way, while data integrity is enforced in the blockchain's distributed consensus protocol, there is still a significant obstacle in authenticating distributed trust and integrity of data inputs.
A Smart Contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts were explained by Nick Szabo in a 1994 article titled “Smart Contracts” the entire contents of which are hereby incorporated by reference. A smart contract is a computerized transaction protocol that executes the terms of a contract or agreement. The general objectives of smart contract design are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement) and related economic goals include lowering fraud loss, arbitration and enforcement costs, and other transaction costs. As smart contracts expand their capabilities to enforce predetermined outcomes, the question arises of whether additional layers of distributed consensus to validate data is necessary before data is immutably mined into a blockchain.
As a result, there exists a need for improvements over the prior art and more particularly for a more efficient and better way for proving the trust worthiness of the blockchain and smart contracts.